A Legend Kicks Off The Trading Week

From Jeff Saut at Raymond James: The brilliant Peter Bernstein (author, historian, and economist) once wrote:

After 28 years at this post and 22 years before this in money management, I can sum up whatever wisdom I have accumulated this way: the trick is not to be the hottest stock-picker, the winning forecaster, or the developer of the neatest model; such victories are transient. The trick is to survive. Performing that trick requires a strong stomach for being wrong, because we are all going to be wrong more often than we expect. The future is not ours to know. But, it helps to know that being wrong is inevitable and normal, not some terrible tragedy, not some awful failing in reasoning, not even bad luck in most instances. Being wrong comes with the franchise of an activity whose outcome depends on an unknown future. Maybe the real trick is persuading clients of that inexorable truth.

The Crowd Went WildSeptember 10 (King World News) – Here is a portion of today’s note from legend Art Cashin: On this day (+1) in 1850, the American tradition of celebrity hysteria was born. And, who else would you expect to be the mid-wife at the event – none other than Phineas Taylor Barnum. The event was the New York debut of a certain Johanna Goldschmidt but perhaps you know her by the name that most gaga New Yorkers knew her by – Jenny Lind. Barnum had imported the soprano from Europe – but – hold your Beatle wig, folks – he thought he needed a “gimmick” to hype things. First he picked a nick- name/image. He called her “the Swedish Nightingale.” Then he announced that for her American tour, they would have to outfit a special railroad car for her special needs. (First private railroad car in history.) He then planted stories that she would occasionally appear at the window, on a balcony, or in the lobby of her hotel. The result was an incredible 30,000 people surrounding the hotel. (First call out of the police to protect a celebrity.)

Barnum then announced that the tickets for her appearance at Castle Clinton, on the southern most tip of Manhattan, were oversubscribed. So, he announced, in true Barnum fashion, that he would auction off the 25¢ tickets. On the first bid a man who was either love struck or a Barnum plant paid $225 for the 25¢ ticket. His name was John Genin. The crowd went wild and began bidding frantically for tickets. (First ticket scalping – an old NYC tradition.) When the auction was over, many of the successful bidders re-offered their tickets at a premium to those who missed the auction. (Second ticket scalping – another tradition.) Having caused more than enough headlines and hysteria, on this night, Barnum escorted his star to the glittering candlelit stage of Castle Clinton and into celebrity history.

Friday’s trading featured neither celebrities nor celebrations.

Tariff Talks Swamp Better Jobs – The jobs and employment data were better than expected. Unfortunately, the first group to notice this seemed to be the bond market and yields moved higher on the fear that prosperity might be breaking out.

The Dow opened lower but buyers began to nibble away and the Dow inched higher through the morning and almost erased all of the opening losses as Europe closed. Then around noon, the President said he was ready to enact tariffs on China goods. The trouble was that the tariffs would not be on the $200 billion expected but also on a further $227 billion in trade. That’s right folks, not the $200 billion the market was looking for but a whopping $427 billion. The trapdoor opened and the Dow plunged 182 points in a matter of minutes.

The Dow regrouped through midday and began to rally in the final two hours but that rally stopped dead when Apple opined that tariffs could hurt both sales and earnings.

Traditional September Weakness And Rosh Hashanah – Last night at sundown marked the start of Rosh Hashanah. About 56 years ago, as I was starting out in Wall Street. I was lucky enough to be hired by a small, bright, aggressive firm where I learned unique things from some wonderful people. I thought they hired me because I was sharp, inquisitive and hard working. Some of the older salesmen, instead, used to joke that I was the “Shabbes Goy” – the only non-Jewish employee who could then man the phones on religious holidays. It was a joke (I think) but it gave an altar boy from Jersey City a chance to learn a little Yiddish and a touch of cultural traditions.

The way I learned it, you sell on Rosh Hashanah and buy back on Yom Kippur. The thesis, I was told, was that you wished to be free (as much as possible) of the distraction of worldly goods during a period of reflection and self-appraisal. Later as I studied market cycles and economic cycles, I was struck that the oft-repeated September/October weakness (crop cycle/money float) often corresponded to the Rosh Hashanah tradition. Is it cultural coincidence or cultural overlap? Who knows!

One last note on Rosh Hashanah. My late, lamented Irish mom, tended to see everything in a Celtic perspective – even Jewish New Years. She would say – “You better get up to the deli fast ’cause the Jewish people will be leaving early for ‘Rose of Shannon’.” Anyway, if it is your holiday, “Leshona Toyva Tikoseyvu!”

One further note – this year the holidays are early so the calendar/cultural overlap may be strained a bit.

Overnight And Overseas – Asian equity markets leaned distinctly to the downside. Japan was odd man out with a modest gain. Shanghai and India fell the equivalent of 320 Dow points, as the U.S./China threats heat up. Hong Kong was down was down even more and sits on the edge of bear market style decline of 20%. In Europe, markets are mixed to a shade higher. London is up fractionally amid some nasty Brexit talk. Markets on the continent are modestly higher. Among other assets, Bitcoin got dinged again and is trading a shade above $6300. Gold is basically flat, trading just under $1200. Crude is firmer on inventory gossip. The euro is a touch higher against the dollar, while yields are basically flat.

Consensus – Futures hint stocks want to buck the Rosh Hashanah “tradition”. Any tariff tweets could have a major, sudden impact as we saw Friday. Stay alert and very, very nimble.